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How to avoid a last-minute scramble for mortgage funds

A first-time homebuyer is surprised when the amount needed to close the transaction is greater than what was budgeted for


Q: I recently purchased a first home and obtained a mortgage from my bank. When I heard from my lawyer with respect to what funds I needed to bring in to close the transaction, I was surprised that the amount was greater than what I had budgeted for. My lawyer showed me the figure that she was getting for my mortgage, which was less by several thousand dollars than what my banker and I had discussed.

This led to me having to scramble around at the last minute and get further funds from my generous parents. How could this have been avoided?

A: What bankers sometimes don’t realize is that there are standard deductions from mortgages that result in less money in their client’s pockets. The first and largest cost is mortgage insurance that is mandatory for clients with high-ratio mortgages (when you have less than 20 per cent down payment). These fees are deducted from the amount borrowed; and don’t forget there can be sales tax over and above the insurance fees.

Further fees can take the form of appraisal fees (a couple hundred dollars) and loan setup fees. If you are using a broker, there may be a deduction for lending fees or broker fees.

The main concern therefore is to directly question the person providing you with your financing to get them to set out in writing the NET amount you will be getting as a loan.  That way, there will be no last-minute scramble and the stress that goes with it.

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